Conservatives disappointed by the fiscal-cliff deal passed by the House last night steel themselves with the knowledge that the fiscal debate in Washington will pivot to spending, and only spending . The context of a debt-ceiling increase, as opposed to the expiration of tax cuts, gives Republicans the leverage they lacked during the fiscal cliff saga. Right?
Not necessarily. Think of it this way: the Republican insistence on maintaining Bush-era tax rates for the wealthy was widely considered unpopular, a public-relations dud. You know what’s even less popular than that? Cutting entitlements .
So, yes, the focus now turns to spending—which poses at least as much risk as it guarantees renewed leverage.
It’s a classic dog-that-caught-the-car scenario. Recall how the fiscal-cliff talks proceeded. The president put forward an audacious offer of $1.6 trillion in new revenue and a paltry $300 billion in cuts (plus $1 trillion in already-pocketed Iraq and Afghanistan drawdown savings). Eventual dealmaker Sen. Mitch McConnell reportedly laughed at the White House’s offer. And then there was a curious reluctance  to identify real cuts, specifically to Medicare. McConnell informally pitched a few reforms that amounted to less than what Obama had already offered . House Republicans eventually asked for lower cost-of-living adjustments to retirees as well as a higher eligibility age for Medicare benefits. All told, these reforms add up to about $500 billion over 10 years—far short of the minimum of $2 trillion they’d like to see pared from the federal budget.
Where will the rest of the savings come from? Republicans are going to have to get specific this time; and even more important, they’re going to have to go first. In their counteroffer letter  to the president, the GOP leadership offered this justification for breasting their cards: it “would be counterproductive to publicly or privately propose entitlement reforms that you and the leaders of your party appear unwilling to support in the near-term.” That’s not going to fly this time. Obama is demanding a clean debt-ceiling increase. Initially, at least, he will not be asking for new revenue as part of a “grand bargain” on taxes and spending. And since he’s not asking for anything new, the onus will be on Republicans to set the opening bid.
In the just-concluded fiscal cliff battle, the impasse was only superficially about Republicans’ demands for spending cuts—it was about Republicans (not irrationally) wanting bipartisan cover for spending cuts. In the coming battle, the Republican position is effectively going to be “Give us the cuts that we all would rather avoid—or we shut down the government .”
Does that smack of a winning political argument to you?
I suspect Republicans are about to discover that the prospects for entitlement reform were a lot more favorable under the cover of such a bargain. Paradoxically, perhaps, new revenue is the friend, not the foe, of the would-be entitlement reformer.
As with the fiscal cliff, the trick for Obama and Republicans leaders in the debt-ceiling negotiations—and let’s not kid ourselves; the president will have to negotiate—will be to isolate the wing of the Republican party that’s eager to fall on the sword of austerity, despite opposition from the public as well as Wall Street . If Republicans re-up their demands for structural entitlement reforms, Obama will counter with a demand for new revenue extracted from “loopholes and deductions that aren’t available to most Americans .” And we’ll be right back into grand-bargain territory—with neither side exercising any more leverage than it had last year. The timing of the budget “sequestration”—shelved  for two months—may actually end up greasing the skids for a debt-ceiling increase. After much sound and fury, the Obama administration may be able to pull those delayed cuts out of its pocket and frame them as fresh concessions.
It won’t be pretty. It’s wholly unnecessary. But this process—lurching from crisis to suboptimal, impermanent resolution, and back to crisis—seems to be the best the system can manage right now.